Opinion
Editorial

Editorial: Liberals should be paying down debt

The Canadian economy experienced robust growth of 3.1 per cent in 2017, and that trend is expected to continue at a more modest 2.2 per cent for 2018. Employment numbers are also up; more Canadians are working and contributing to the nation’s prosperity.

It’s all good news, until you look at the federal government’s projected deficit for 2017-2018. It’s much lower than an earlier estimate of $28.5 billion; in January the budget deficit was forecast at $18.5 billion. But the deficit is too big and, against a more austere economic backdrop, ­unsustainable.

On Thursday, the Fraser Institute suggested the Liberals should be planning for a rainy day, for the inevitable economic downturn.

Indeed, the Fraser folks say Ottawa’s annual deficit could balloon to as much as $120 billion when Canada enters the next recession.

Their analysis examined three recessions — 1991-1992, 2000-2001, and 2008-2009 — and applied the same revenue declines and program spending increases to the government’s current finances.

The results varied in deficit intensity, but all pointed to financial difficulty for the government.

And the conclusion is clear: If governments can’t balance a budget during moderate or strong economic growth, then deep deficit spending is inevitable during a poor economy.

The Fraser Institute found if Canada entered conditions similar to the 1991-1992 recession, the 2020-2021 deficit would be $46.1 billion.

If conditions were similar to the economic slowdown of 2000-2001, the deficit would be $64.1 billion.

But the 2008-2009 recession, if replicated in this era, would lead to a $120-billion deficit for the 2020-2021 fiscal year.

Jason Clemens, executive vice-president of the Fraser Institute and co-author of Federal Deficits and Recession: What Could Happen, warns “the federal government should consider the very real risk of a future economic downturn when drafting future budgets to mitigate the potential of even larger deficits and debt accumulation.”

The federal Liberals would do well to heed to the Fraser Institute and other Jeremiahs. Since 1980 Canada has suffered through four recessions. Each has produced a predictable phenomenon, lower government revenues and increased spending, and with inevitable deficits and accumulated debt.

It stands to reason another economic downturn will occur, and with the same results.